Weakened Dollar and Outsourcing Helped IBM Come Out on Top
Bruce Meyerson of the New York Times
(login required) tells us that the weak dollar has helped IBM finish the
previous year with flying colors.
Fourth-quarter revenue rose 7 percent to $27.67 billion compared
with the year-ago tally of $25.91 billion. About 4 percentage points of the
gain was driven by the rising value of the euro and other currencies against
the dollar - which makes U.S. products less expensive overseas and foreign
sales more valuable when converted back to dollars.
Both the profit and revenue figures exceeded Wall Street forecasts. Analysts
had expected a fourth-quarter profit of about a nickel less, with sales of
$27.5 billion, according to a survey by Thomson First Call.
Briefly, he also mentions the role of outsourcing - mostly offshoring, it
should be safe to presume - in generating this windfall for the international
software superpower.
Revenues from computer support services sold to businesses,
including consulting, outsourcing and maintenance, grew 10 percent to $12.6
billion.
PCs became more of a "commodity appliance" in 2004, according to this AP article written
late last year. This trend significantly affected IBM's sales strategy.
Nonetheless, IBM was able to adjust, and its adaptive measures seem to have
paid off.
The company's new focus is its services and outsourcing
businesses, which it calls Business Transformation Services, a market IBM CEO
Sam Palmisano says is worth $500 billion a year. For example, it signed a $300
million, 10-year technology outsourcing deal with the government of British
Columbia Friday. Under the deal, 170 provincial employees will be offered jobs
at IBM.
[...]
PC sales account for about 10 percent of IBM's total sales, and PC profits
have been slim. Morgan Stanley estimates that the PC business contributed less
than 1 percent of the company's earnings per share.
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